China commercial banks' net forex sales dip to six-month low in Feb

Reuters Staff

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A sign for foreign currency exchange is seen at a branch of the ICBC bank in Beijing, China, January 3, 2017.Thomas Peter

BEIJING (Reuters) - Net foreign exchange sales by China's commercial banks fell to their lowest level in six months in February, as capital outflows eased due to tighter regulatory curbs and a steadying yuan.

China's commercial banks sold a net $10.1 billion of foreign exchange in February, down 47 percent from January and the lowest amount since August, data from the foreign exchange regulator showed on Thursday.

For the January to February period, net forex sales stood at $29.3 billion, the State Administration of Foreign Exchange said on its website.

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The regulator said capital inflows and outflows would become more balanced in the future.

The central bank raised short-term interest rates on Thursday in what economists said was a bid to stave off capital outflows and keep the yuan currency stable after the Federal Reserve raised U.S. rates overnight.

That followed a string of regulatory steps to curb capital outflows, including increased scrutiny on outbound investment deals and individual foreign currency purchases.

Earlier data showed China's central bank in February sold the smallest amount of foreign exchange in nine months, supporting the government's assertions that capital outflows were easing amid tighter scrutiny of cross-border flows.

China's yuan has steadied this year after falling 6.5 percent last year - the biggest annual drop since 1994.

Central bank governor Zhou Xiaochuan said last week market expectations of the yuan's movements have shown "big changes" this year as China's economy stabilises.

China's foreign exchange reserves unexpectedly rebounded back above $3 trillion in February due to fund outflow curbs and the steadying yuan.